Receipts and Payments reporting where there are non-cash assets and liabilities

Receipts and Payments reporting (referred to as R&P) for Charities and Churches is commonly used on the basis that it is thought to be more straightforward - particularly when the organisation only manages cash balances; A simple Statement of R&P (SoFA) with the Fund balance(s) agreeing with the Cash and Bank balance(s).

However, when non-cash assets (such as Investments or Fixed Assets) and liabilities (such as Amounts owed to Suppliers or Grant Recipients) are part of the finances things are a little more complex. In addition to the SoFA a Statement of Assets and Liabilities is required.

In the R&P reporting templates offered by the various charity regulators, the Statement of Assets and Liabilities is not required to balance to anything (unlike your expectation if you were producing a Balance Sheet). This can cause confusion when reporting under R&P.

Whilst the R&P Fund balance(s) must always equal the Cash and Bank balance(s), the value of non-cash assets and liabilities must be represented Income & Expenditure(Accruals) basis (referred to as I&E) fund balance. After all any investment or fixed asset was financed originally from income. Liberty Accounts maintains the Accruals basis fund balance(s) so that the Balance Sheet report provides the information for the Statement of Assets and Liabilities and allows the organisation to change to accrual basis reporting in the future with relative ease should there be a requirement.

The following example is offered as a guide. Three transactions, the first the receipt of a donation,the second using the donation to purchase an asset and finally revaluing that asset.

At this point there are no assets and the closing fund(s) balance agrees with the bank(s) balance - as it does if you were reporting under I&E.

With the purchase of the asset the closing R&P fund(s) balance agrees with the bank(s) balance but we are showing our Investment Asset in the Statement of Financial Liabilities with no corresponding balance. For your information a Balance Sheet under this situation would report the I&E fund balance of £9,500 to match the asset value.

Reportng under I&E the purchase of the investment does NOT affect the fund balance as the fund balance which was held as cash is now held as the asset. If the asset is sold the cash would be returned.

The revaluation of the investment does not bring any cash into the organisation and is therefore NOT shown on the R&P SoFA (which only shows cash movement) however the increased value is shown in the Statement of Financial Liabilities with no corresponding balance.

As illustrated above, when reporting under I&E the net gain/loss on the investment IS reflected in the SoFA and your reporting of the Balance Sheet will show this.

So, in summary, where you are reporting under R&P and have any assets or liabilities then you should be reporting a Statement of Assets and Liabilities and, unlike a Balance Sheet, it is not required to balance against anything.